Written by Marcin Szczepanski
The financial and economic crisis has been marked by the ‘Too big to fail’ problem – a number of financial institutions of a size large enough to pose a systemic problem to the economy required public support to continue operations. According to economic research this has led to implicit subsidies and a distortion of competition in banking markets.
As part of major reforms of the financial markets, the European Commission has launched a structural reform of the banking sector. In particular, this will ban Europe’s largest banks from carrying out risky proprietary trading activities, and empower national banking supervisory authorities with the ability to carry out systematic reviews of banking activities.
The Commission’s proposal has divided stakeholders’ opinion with the financial sector fiercely opposing it, while consumer groups and financial watchdogs consider the measures are not strong enough. A few Member States have already undertaken reforms of their banking sectors, raising questions of conformity with the Single Market under the new proposed rules.